P contracted to sell a warehouse “suitable for redevelopment” to D and, in response to D’s question, stated (before signing of contract) that it was not a listed building and was therefore a site that could be redeveloped. However, the day after the contract was signed, the dept for environment decided to list the building. D sought rescission on the grounds of mutual mistake or frustration, in that at the time of signing both parties believed the building was suitable for redevelopment. CA rejected this claim and granted an order for specific performance of the contract. There was no mutual mistake since, at the time of signing the building was not listed (this only happened later). On frustration, the purchasers had not stipulated in the contract that the building must not be listed for the contract to be effective and therefore they had assumed the risk of the building being listed.
Buckley LJ: For mistake to operate it has to have been made at the time of signing. Here there was no mistake since, at the time of signing, the building was not listed and was suitable for redevelopment. A later administrative decision doesn’t change this. He reasons on the basis that this sort of risk ought to lie with the purchaser e.g. what if the property had been rendered less useful by legislation or taxation or compulsory purchase etc. These are risks of which any purchaser is aware but decides to take the risk nevertheless
SIR JOHN PENNYCUICK: The thing that the contract rendered was not radically different- it was the same property except subject to an additional limitation. Therefore it failed the test set out by Lord Radcliffe (NB this is harsh: the value of the property fell £1.5m after being listed)
CW: This is a retreat from Krell since P was aware that D only bought the property for redevelopment and yet the assertion that performance was not radically different from that intended in the contract + allocation of risk attempt to avoid the conclusion that frustration would be appropriate.